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    National Power Corporation V Provincial Government of Bataan PDF

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    Bianca Bnc
    This case concerns the National Power Corporation's (NPC) dispute with the Province of Bataan over unpaid franchise taxes from 2001-2003. The NPC argued it was exempt from the tax under the Electric Power Industry Reform Act of 2001, which transferred NPC's power generation and transmission functions to new government corporations. The Court of Appeals dismissed the case for lack of jurisdiction. The Supreme Court ruled that by operation of law, NPC ceased owning or operating the businesses subject to the tax. Thus, the Province could not levy NPC properties that had been transferred to other entities.

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    © All Rights Reserved
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    National Power Corporation V Provincial Government of Bataan PDF

    Uploaded by

    Bianca Bnc
    71 views4 pages
    This case concerns the National Power Corporation's (NPC) dispute with the Province of Bataan over unpaid franchise taxes from 2001-2003. The NPC argued it was exempt from the tax under the Electric Power Industry Reform Act of 2001, which transferred NPC's power generation and transmission functions to new government corporations. The Court of Appeals dismissed the case for lack of jurisdiction. The Supreme Court ruled that by operation of law, NPC ceased owning or operating the businesses subject to the tax. Thus, the Province could not levy NPC properties that had been transferred to other entities.

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    17. National Power Corporation v Provincial Government of Bataan.pdf

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    This case concerns the National Power Corporation's (NPC) dispute with the Province of Bataan over unpaid franchise taxes from 2001-2003. The NPC argued it was exempt from the tax under the Electric Power Industry Reform Act of 2001, which transferred NPC's power generation and transmission functions to new government corporations. The Court of Appeals dismissed the case for lack of jurisdiction. The Supreme Court ruled that by operation of law, NPC ceased owning or operating the businesses subject to the tax. Thus, the Province could not levy NPC properties that had been transferred to other entities.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    71 views4 pages

    National Power Corporation V Provincial Government of Bataan PDF

    Uploaded by

    Bianca Bnc
    This case concerns the National Power Corporation's (NPC) dispute with the Province of Bataan over unpaid franchise taxes from 2001-2003. The NPC argued it was exempt from the tax under the Electric Power Industry Reform Act of 2001, which transferred NPC's power generation and transmission functions to new government corporations. The Court of Appeals dismissed the case for lack of jurisdiction. The Supreme Court ruled that by operation of law, NPC ceased owning or operating the businesses subject to the tax. Thus, the Province could not levy NPC properties that had been transferred to other entities.

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    THIRD DIVISION

    [G.R. No. 180654. April 21, 2014.]

    NATIONAL POWER CORPORATION , petitioner, vs . PROVINCIAL


    GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF
    BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS
    PROVINCIAL TREASURER OF BATAAN) and THE REGISTER OF
    DEEDS OF THE PROVINCE OF BATAAN , respondents.

    DECISION

    ABAD , J : p

    This case is about the distinction between an action contesting a local tax
    assessment and an action seeking to enjoin the local government from enforcing a tax
    assessment against a person who claims that the taxable business does not belong to
    him. CSIcTa

    The Facts and the Case


    On March 28, 2003 petitioner National Power Corporation (NPC) received a notice
    of franchise tax delinquency from the respondent Provincial Government of Bataan (the
    Province) for P45.9 million covering the years 2001, 2002, and 2003. The Province based
    its assessment on the NPC's sale of electricity that it generated from two power plants in
    Bataan. Rather than pay the tax or reject it, the NPC chose to reserve its right to contest
    the computation pending the decision of the Supreme Court in National Power Corporation
    v. City of Cabanatuan , 1 a case where the issue of the NPC's exemption from the payment
    of local franchise tax was then pending.
    On May 12 and 14, 2003 the Province again sent notices of tax due to the NPC,
    calling its attention to the Court's Decision in National Power Corporation v. City of
    Cabanatuan that held the NPC liable for the payment of local franchise tax. The NPC
    replied, however, that it had ceased to be liable for the payment of that tax after Congress
    enacted Republic Act (R.A.) 9136, also known as the Electric Power Industry Reform Act
    (EPIRA) that took effect on June 26, 2001. The new law relieved the NPC of the function of
    generating and supplying electricity beginning that year. Consequently, the Province has no
    right to further assess it for the 2001, 2002, and 2003 local franchise tax.
    Ignoring the NPC's view, the Province issued a "Warrant of Levy" on 14 real
    properties that it used to own in Limay, Bataan. In March 2004 the Province caused their
    sale at public auction with itself as the winning bidder. Shortly after, the NPC received a
    copy of the Certi cate of Sale of Real Property covering the auctioned properties for
    P60,477,285.22, the amount of its franchise tax delinquency.
    On July 7, 2004 the NPC led with the Regional Trial Court (RTC) of Mariveles,
    Bataan, a petition for declaration of nullity of the foreclosure sale with prayer for
    preliminary mandatory injunction against the Province, the provincial treasurer, and the
    Sangguniang Panlalawigan.

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    The NPC alleged that the foreclosure had no legal basis since R.A. 7160 which
    authorized the collection of local franchise tax had been modi ed by the EPIRA. The latter
    law provided that power generation is not a public utility operation requiring a franchise,
    hence, not taxable. What remains subject to such tax is the business of transmission and
    distribution of electricity since these required a national franchise. As it happened, NPC
    had ceased by operation of the EPIRA in 2001 to engage in power transmission, given that
    all its facilities for this function, including its nationwide franchise, had been transferred to
    the National Transmission Corporation (TRANSCO).
    Thus, the NPC asked the RTC to issue a preliminary injunction, enjoining the transfer
    of title and the sale of the foreclosed lands to Bataan and, after trial, to make the injunction
    permanent, declare NPC exempt from the local franchise tax and annul the foreclosure
    sale.
    On November 3, 2005 the RTC dismissed the NPC's petition, stating that the
    franchise tax was not based on ownership of property but on the NPC's exercise of the
    privilege of doing business within Bataan. Further, the NPC presented no evidence that it
    had ceased to operate its power plants in that jurisdiction.
    The NPC appealed the RTC Decision to the Court of Appeals (CA) but the Province
    moved to dismiss the same for lack of jurisdiction of that court over the subject matter of
    the case. The Province pointed out that, although the NPC denominated its suit before the
    RTC as one for declaration of nullity of foreclosure sale, it was essentially a local tax case
    questioning the validity of the Province's imposition of the local franchise tax. Any appeal
    from the action should, therefore, be lodged with the Court of Tax Appeals (CTA). On
    November 27, 2007 the CA granted the Province's motion and dismissed the petition on
    the ground cited.
    Issue
    The issue in this case is whether or not the CA erred in failing to rule that the NPC no
    longer owned or operated the business subject to local franchise tax and that the Province
    cannot execute on former NPC properties that had been taken from it and transferred to
    other government corporations.
    Ruling of the Court
    The RTC found that the NPC failed to present evidence that it no longer owned or
    operated the business subject to local franchise tax and that the properties the Province
    levied on did not belong to it. But proving these things did not require the presentation of
    evidence in this case since these events took place by operation of law, particularly the
    EPIRA. Thus, Section 8 of the EPIRA provides: TADaCH

    SEC. 8. Creation of the National Transmission Company. — There is hereby


    created a National Transmission Corporation, hereinafter referred to as TRANSCO,
    which shall assume the electrical transmission function of the National Power
    Corporation (NPC), and have the power and functions hereinafter granted. The
    TRANSCO shall assume the authority and responsibility of NPC for the planning,
    construction and centralized operation and maintenance of its high voltage
    transmission facilities, including grid interconnections and ancillary services.

    Within six (6) months from the effectivity of this Act, the transmission and
    subtransmission facilities of NPC and all other assets related to transmission
    operations, including the nationwide franchise of NPC for the operation of the
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    transmission system and the grid, shall be transferred to the TRANSCO. The
    TRANSCO shall be wholly owned by the Power Sector Assets and Liabilities
    Management Corporation (PSALM Corp.).

    The subtransmission functions and assets shall be segregated from the


    transmission functions, assets and liabilities for transparency and disposal:
    Provided, That the subtransmission assets shall be operated and maintained by
    TRANSCO until their disposal to quali ed distribution utilities which are in a
    position to take over the responsibility for operating, maintaining, upgrading, and
    expanding said assets. All transmission and subtransmission related liabilities of
    NPC shall be transferred to and assumed by the PSALM Corp.
    TRANSCO shall negotiate with and thereafter transfer such functions,
    assets, and associated liabilities to the quali ed distribution utility or utilities
    connected to such subtransmission facilities not later that two (2) years from the
    effectivity of this act or the start of open access, whichever comes earlier: . . . .

    xxx xxx xxx

    The above created the TRANSCO and transferred to it the NPC's electrical
    transmission function with effect on June 26, 2001. The NPC, therefore, ceased to operate
    that business in Bataan by operation of law. Since the local franchise tax is imposed on the
    privilege of operating a franchise, not a tax on the ownership of the transmission facilities,
    it is clear that such tax is not a liability of the NPC.
    Nor could the Province levy on the transmission facilities to satisfy the tax
    assessment against the NPC since, as Section 8 above further provides, the latter ceased
    to own those facilities six months from the effectivity of the EPIRA. Those facilities have
    since belonged to TRANSCO.
    The legislative emasculation of the NPC also covered its former power generation
    function, which was the target of the Province's effort to collect the local franchise tax for
    2001, 2002, and 2003. Section 49 of the EPIRA provides:
    SEC. 49. Creation of Power Sector Assets and Liabilities Management
    Corporation. — There is hereby created a government-owned and -controlled
    corporation to be known as the "Power Sector Assets and Liabilities Management
    Corporation," hereinafter referred to as the "PSALM Corp.," which shall take
    ownership of all existing NPC generation assets, liabilities, IPP contracts, real
    estate and all other disposable assets. All outstanding obligations of the NPC
    arising from loans, issuances of bonds, securities and other instruments of
    indebtedness shall be transferred to and assumed by the PSALM Corp. within one
    hundred eighty (180) days from the approval of this Act.

    Section 49 above created the Power Sector Assets and Liabilities Management
    Corporation (PSALM Corp.) and transferred to it all of the NPC's "generation assets" which
    would include the Bataan Thermal Plant. Clearly, the NPC had ceased running its former
    power transmission and distribution business in Bataan by operation of law from June 26,
    2001. It is, therefore, not the proper party subject to the local franchise tax for operating
    that business. Parenthetically, Section 49 also transferred "all existing . . . liabilities" of the
    NPC to PSALM Corp., presumably including its unpaid liability for local franchise tax from
    January 1 to June 25, 2001. Consequently, such tax is collectible solely from PSALM Corp.
    An indispensable party is one who has an interest in the controversy or subject
    matter and in whose absence there cannot be a determination between the parties already
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    before the court which is effective, complete or equitable. 2 Here, since the subject
    properties belong to PSALM Corp. and TRANSCO, they are certainly indispensable parties
    to the case that must be necessarily included before it may properly go forward. For this
    reason, the proceedings below that held the NPC liable for the local franchise tax is a
    nullity. It did not matter where the RTC Decision was appealed, whether before the CA or
    the CTA.
    WHEREFORE , the Court GRANTS the petition of the National Power Corporation
    and SETS ASIDE the Resolution of the Court of Appeals in CA-G.R. CV 87218 dated
    November 27, 2007. It further REMANDS the case to the Regional Trial Court so that the
    Power Sector Assets and Liabilities Management Corporation and the National
    Transmission Corporation may be impleaded as proper parties. TCacIE

    SO ORDERED .
    Velasco, Jr., Brion, * Peralta and Leonen, JJ., concur.

    Footnotes
    * Designated Additional Member, in lieu of Associate Justice Jose C. Mendoza, per Ra e dated
    October 9, 2013.
    1. 449 Phil. 233 (2003).
    2. Lagunilla v. Velasco, G.R. No. 169276, June 16, 2009, 589 SCRA 224.

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